Babel Finance – an Asian crypto lending platform coming off a $2 billion valuation – has revealed that it is facing liquidity pressures. It has therefore stopped all withdrawals or redemptions from products on its platform in order to protect customers.
In a company announcement on Friday, Babel explained that its troubles stem from “major fluctuations” in the crypto market.
Last weekend, the crypto markets plunged to new lows not seen since December 2020. This caused a flood in liquidations, and even forced MicroStrategy into pledging more collateral for its Silvergate loan.
As Babel noted, some institutions in the industry have now experienced “conducive risk events,” causing liquidity pressure at the company.
Among these institutions is Celsius – another crypto lending platform that was forced to pause withdrawals as it struggled to refinance its loan with Oasis. It is not yet clear when withdrawals will resume.
Three Arrows Capital, a VC company (3AC), has been plagued with rumors about imminent liquidations since days. Some of the company’s partners have revealed that 3AC has ceased contacting them, despite the company’s co-founder claiming that his team is “communicating with relevant parties.”
Babel Finance has issued a statement similar to 3AC’s: “We are in close communication with all related parties on the actions we are taking in order to best protect our customers,” wrote the firm.
Many crypto lending platforms rehypothecate user deposit to increase yields by using loans in defi space using digital asset collateral. These loans are more vulnerable to liquidation in the event of a market pullback.
Jesse Powell, Kraken CEO, said in a tweet on Wednesday that his exchange plays no such “exotic shell games” in defi.